You must set it to .png and add alpha channel on the background color, i recommend GIMP as a good program to do this.
Only select the "Color Selection" tool, select the color you want as transparent, right click the image's layer, and click "Add Alpha Channel", so everuthing you delet on the image will be trasparent.
You can use "Brush" and "Pencil" tools to make shadows too, like in Roni's signature image
use IrfanView, it is even easier than Gimp.
all you have to do is load the image and then save it again (as a .png file).
while being in the saving-menu you have to tick a little box whichs says "save transparent colour" and then after pressing the "save" button a small window appears where you just have to click the colour you want to set as transparent once.
and that's it, pretty easy I'd say
use IrfanView, it is even easier than Gimp.
all you have to do is load the image and then save it again (as a .png file).
while being in the saving-menu you have to tick a little box whichs says "save transparent colour" and then after pressing the "save" button a small window appears where you just have to click the colour you want to set as transparent once.
and that's it, pretty easy I'd say